Measuring human capital: case studies

Accounting
for People, the Task Force on Human Capital Management’s report contains
some useful case studies on organisations that are making headway in this
field. We reproduce three of them here – Unilever UK, RAC and BP.

Our
intent is to deliver value generation (for all our stakeholder) through
people.In arriving at our people
strategy we look at three key questions: what key behaviours do our people need
to display in order to achieve our business vision and goals; what specific HR
policies and practices do we need to encourage these key behaviours; what other
HR interventions, proactive or reactive, are necessary in order to deliver out
overall business plan?

Based
on these we have developed a UK People strategy with 4 key thrusts: leadership,
talent management, efficiency and cost effectiveness, and culture.

Each
of our operating units has its own detailed expression of these thrusts,
appropriate to the specific priorities of the unit, but the underlying intent
and themes are common.

Leadership

This
is about ensuring we have leaders who individually and collectively inspire
‘delivery through people’ and unleash people’s power and creativity.

Activities:
– Leadership Competency model in year-round use to support development of
leadership capabilities and underpin talent management work.
– leadership teams undertaking challengingdevelopment work to build relationships,
self-awareness and understanding of emotional intelligence
– Intensive 6-month leadership training programmes
– Coaching, and equipping leaders to become coaches, across all management
levels

Assessment:
– people survey
– extensive use of 360 degree feedback for managers

Outcomes
– examples
– people survey 2002 scored above the UK norm on commitment (ie pride in
working for Unilever and overall satisfaction with the company)

Talent
management

This
is about attracting, keeping and nurturing the best talent at all levels, to
make the company ‘the place to be’ and to make people proud to work here.

RAC
plc employs 11,500 people throughout the UK.Following the acquisition of RAC by Lex Service plc (now RAC plc) we
operated throughout the group a number of different HR and payroll
databases.We recognized the need very
early to understand, evaluate and recommend the changes necessary to achieve an
integrated approach to our HR practices, as we identified that this could help
us reduce costs and improve efficiency.This included one common set of quantifiable HR measures.

In
total we identified 10 core HR measures with the aim to report on a quarterly
basis.The 10 core measures were:

The
number of legacy HR and payroll systems led to inefficient and ineffectiveness
– measures were out of date by the time they were consolidated and therefore
did not engage line management or inspire confidence about their accuracy.

In
2000 we embarked on our journey to harmonise our HR databases and procured a
common HR and payroll database for the group, in an effort to benchmark across
the Company and identifyand implement
best practice.At the end of 2002 all
RAC plc colleagues were on one database, therefore ‘enabling’ one set of HR
measures to be produced.We named this
the ‘People P&L’, recognizing it was important and valuable as the financial
P&L.

We
piloted and refined the measures for circa 6 months, addressing concerns about
the format and accuracy.We created
common definitions and processes for administration, so that we could make
relevant comparisons.

During
the pilot period we benchmarked and quantified the cost of turnover, new
colleague retention and absence.We
used the CIPD HR Trends and Prospects Survey as a nationwide comparator as well
as ASDA, who were at the time perceived to be the No 1 Company to Work For
(2001 Sunday Times Top 100 Companies to Work For).

The
‘People P&L’ was quickly integrated into the business units as it was
easily linked to the business strategy and the line management could see first
hand the ‘bottom line’ impact.

The
vision of the RAC plc is to make a ‘good’ company into a ‘great’ company
through delivering inspirational service.Progress and success is measured through colleague satisfaction, growth
in revenue and growth in shareholder profit.The board sets the performance targets for each of these annually using
a traffic light system.Out targets for
colleague satisfaction is to achieve 75per cent satisfaction.

Although
we started off with 10 core HR measures as indicated earlier, we prioritised
the first 4 of these and added another, internal appointments, for our
monthly‘People P&L’.The targets and results relative to target
are monitored on a monthly basis by business unit.

3.
BP: measuring employee satisfaction

With
a continuously changing business environment and recent mergers, acquisitions
and de-mergers, BP has become a huge and complex company.We are now working to simplify, remove
complexity and create clarity.

We
use Management Information (MI) about our people to help measure progress
towards strategic and operational goals, validated by external benchmarking
wherever possible.A key component in
the annual People Assurance Survey (PAS), which is managed independently and
has elements that are benchmarked within member companies.It assesses the following major components
of organisational effectiveness:

We
review and refresh our MI every year, adjusting as necessary to ensure that it
is focused on BP’s strategic objectives.

Given
the increasingly clear association between staff satisfaction and business
results, we calculate an annual Employment Satisfaction Index (ESI) on the
basis of the ten relevant PAS items. Since 1999, BP’s ESI has increased by 7per
cent. Group and local HR actions developed as a result of PAS feedback have
contributed to this increase; in many business units, steering committees made up
of local employees generate and implement ideas for raising satisfaction
levels.

Our
people-related MI has a range of purposes, including internal measurement of
performance and planning future activities, and it is reported annually in BP’s
‘Environmental and Social Report’, which informs external stakeholders about
the progress we have made towards meeting the commitments covered by our
non-financial business policies.